Private equity players, venture capital funds pump in 28% more money into domestic companies

Private equity players and venture capital funds have pumped in 28 per cent more money into domestic companies, mostly into startups, totalling USD 34.1 billion in the first half of the year, according to a report.

The first half of 2022 saw these funds closing as many as 714 deals, including 92 large deals worth USD 23.7 billion, according to a report by EY and the Indian Private Equity & Venture Capital Association (IVCA).

On a sequential basis the inflows are down 32 per cent from USD 50.4 billion, the report said.

The period also saw PE/VC exits worth USD 9.6 billion across 120 deals, including seven PE-backed IPOs with USD 423 million in exit proceeds. This was down 55 per cent year-on-year.

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According to Vivek Soni, a partner and national leader -- PE services at EY India, though the investments rose 28 per cent year-on-year in H1 to USD 34.1 billion, sequentially this was down 32 per cent.

Despite the sequential decline, due to the global headwinds of tightening liquidity and rising inflation and the risk aversion due to the Ukraine war, the PE/VC investment inflows remained robust, maintaining a monthly average run-rate of USD 6 billion, which is in line with last year, he said.

As much as 54 per cent of new fund inflows went to the startups, but this is only two-thirds of what the industry got in the second half of last year when startup deals were at an all-time high.

Buyouts have been the lowest since the first half of 2020, recording only USD 4.3 billion across 25 deals, down 46 per cent year-on-year and 70 per cent sequentially, Soni said.

Exits were lower by more than 55 per cent both sequentially and year-on-year in the absence of large strategic and secondary deals. Moreover, a drought in PE-backed IPOs (seven PE-backed IPOs in H1) has further dampened the value of PE/VC exits.

Sector-wise, financial services received the largest investments at USD 7.3 billion across 152 deals, which almost doubled, followed by e-commerce at USD 4 billion (101 deals) but was down 16 per cent, and the technology sector with USD 4 billion (121 deals), down 20 per cent.

Media and entertainment, logistics and education were some of the new sectors that saw significant PE/VC interest recording a 2-3x increase at USD 3.4 billion across 41 deals, making it the highest half-yearly investments.

Another sector that has seen significant PE/VC interest is education, recording USD 2.2 billion across 42 deals, making it the highest half-yearly value and 57 per cent higher year-on-year.

In terms of the number of deals, it was up 37 per cent year-on-year to 714 deals from 522 transactions but slipped 4 per cent from H2 of 2021 when there were 748 deals.

Pure play PE/VC investments (excluding real estate and infra sectors) grew 29 per cent and accounted for 79 per cent of the total at USD 28 billion against USD 21.7 billion.

The period saw 92 large deals (value greater than USD 100 million) aggregating to USD 23.7 billion compared to 70 for USD 19.5 billion in H1 of 2021. The largest deals were Bodhi Tree acquiring 40 per cent in Viacom18 for USD 1.8 billion and a group of investors, including CPPIB, Sofina, and Sumeru Ventures, investing USD 805 million in Dailyhunt.

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Startup investments were the highest with USD 13.3 billion across 506 deals, up 54 per cent year-on-year from USD 8.6 billion across 327 deals, followed by growth investments at USD 11.4 billion across 106 deals, up 41 per cent.

Buyouts were the only deal segment that saw a decline of 46 per cent to USD 4.3 billion across 25 deals. Credit investments grew more than three-fold to USD3.1 billion across 46 deals.